FTX proves MiCA should be passed fast, officials tell European Parliament committee

Officials tell the European Parliament committee that FTX demonstrates why MiCA should be passed quickly. During its most recent hearing on FTX, the committee asked financial officials to evaluate the impact of FTX’s collapse on Europe and suggest a course of action.

On November 30, a hearing on the “FTX cryptocurrency exchange collapse and implications for the EU” was held by the Economic and Monetary Affairs Committee of the European Parliament. In a “preliminary assessment of the events,” three European monetary officials testified about FTX, blockchain technology, and crypto regulation.

Steffen Kern, head of the Risk Analysis and Economics department at the European Securities and Markets Authority (ESMA), told the committee that ESMA “has neither regulated nor supervised FTX” and does not possess any “information on the company beyond what is in the public domain.

“Due to the small percentage of the market that is comprised of cryptocurrency and the limited connections that exist between cryptocurrency and conventional finance, the ESMA does not believe that the collapse of FTX poses a significant threat to the overall financial sector.

Kern came to a conclusion by stating that the Markets in Crypto-Assets Regulation (MiCA) legislation, which will take effect in 2024, “is tackling the right issues to introduce vital protections for investors and important rules for market participants through a common EU regime.”

Kern responded to questions by stating that FTX (EU) Ltd., which is based in Cyprus, had been granted a license under the Markets in Financial Instruments Directive, despite the fact that the license does not cover cryptocurrency. On November 9, that license was suspended.

During the hearing, Member of the European Parliament and MiCA Rapporteur Stefan Berger referred to FTX as “essentially SBF and a system that depended on him.””FTX is not the failure of blockchain technology; rather, it is the failure and arrogance of a single individual.”He went on:

“I want two things from politicians: First and foremost, the MiCA must be passed as soon as possible. Second, it would be ideal if numerous nations outside of the European Union followed MiCA’s lead. The best solution would be a global MiCA.

“Under the MiCA regime, no companies providing cryptoassets in the EU would have been allowed to be organised, perhaps it’s better to say disorganized, in the way that FTX reportedly was,” said Alexandra Jour-Schroeder, Deputy Director eneral of the EU Financial Services, Financial Stability, and Capital Markets Union to the committee.

On November 28, Christine Lagrande, president of the European Central Bank, was presented to the committee. She cited the FTX saga as proof that additional “MiCA II” legislation was required.

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